FootyTips made headlines earlier this week when it was acquired by international sports broadcasting network ESPN. It’s a success story for the local tech industry, and once again highlights the interest international investors have in our internet scene.
The acquisition is the second for FootyTips, after it was sold to Tattersalls a decade ago and then repurchased by the founders. Co-founder Heath Kilgour explains how he and business partner Nathan Isterling caught the attention of the world’s largest sports media network.
Can you describe how you decided on selling the business again?
We ran a competitive process for the sale of the business. We decided we wanted to go through that process after receiving interest from different parties. But without any sort of competitive tension it’s hard to ramp up the negotiations in your favour.
How did ESPN come into all this?
Obviously ESPN were on our radar, but it was a combination of stars aligning really. They had recently put someone on the ground here, and ESPN has a big focus on localisation. They’re big on delivering local content and mobile is a big strategy for them. So I think it was a combination of all those things, ESPN was simply one of the parties we ended up having discussion with.
What attracted you to them?
Their vision is to serve sports fans wherever they are. We started looking at ESPN and their mission, and it sat really well with our team. Their mission really suits our organisation and I think that’s what’s great about ESPN – they understood sport really well, and that’s simply what they do. Other media organisations might do a range of things like finance or general news, but the focus of ESPN is purely on sports, and not on anything else.
This is an acquisition by a large company – were you nervous about being bought by such a big entity?
I think media organisations work better when they are bigger, because there is just so much leverage. We thought we had developed a great product with FootyTips, and had been doing a lot of work on our live score apps. We felt at that point we had a good audience and had made a lot of decisions about where our brand was at that time. And that audience is perfect to leverage off into other sporting sites, so it made sense that our audience could be leveraged to that type of media company.
Being independently owned without any of that leverage to fall back onto would have been difficult to grow the business the way we wanted to.
For those readers who don’t know the story, could you describe the sale process to Tattersalls?
When Steve Bracks came to power, one of the policies was to do a national tipping competition, through a government sanctioned license. And that was run by Tipstar, which was a joint venture between Tattersalls and another company.
That licensed product was an official AFL product, and we reached out to them because we thought we would be able to provide a good product. They were interested and pretty much acquired us straight away.
In the end, FootyTips was not really strategically aligned to Tattersalls. It was a good idea at the time, but they had a license and in the end it wasn’t a great fit.
You were still a small company then, is that right?
We sold the business and it only really had $5,000 when we sold it, but had a good database. Our deal was hatched very quickly. I was 25, Nathan was a bit younger than me, so we were pretty inexperienced.
We would have done it a lot differently in hindsight. We were such a tiny business, and it made sense at the time because we thought it was a great opportunity. We had no idea what the future of the business would be like.
What do you think changed between your first acquisition and this one?
The second time around it was a lot different. We had corporate advisors, and we had a very clear strategy through the entire sales process before we even engaged with any of the vendors. We put up a brochure to people and they all got information memorandums. It’s great to be able to have an advisor managing that process because it’s an extremely emotional process.
It’s great to have someone who can sit between you, and the buyer, and is not emotional about it. They can help you get a better deal without ruining the relationship, and these are the people you want to be working with.
Did anything surprising happen?
It took longer than we expected. ESPN is a large organisation with multiple offices around the world, and in different time zones, so it took a lot of time to organise phone conferences and that sort of thing. We weren’t used to that.
A lot of people were involved in the whole thing.
What did you need to show ESPN that you were worth the money?
We had to prove to them we had a good track record of success, and that we had the right strategies to continue with that. We’ve continued growth year on year in revenue in both users and unique browsers, and it gets harder to maintain that growth. But we had to prove that we’ve both delivered on those metrics and we have strategies going forward.
Did you tell the staff straight away?
Once we had an offer we accepted, we had an initial meeting after that and told the employees quite early. It would have been difficult for us to hide what’s going on, because it’s a pretty small office, and we would have been going into conference calls and so on. It’s just easier to tell them up front.
Then the ESPN team came in and said hello, and that allowed the staff to just see that it was for real. They’re all pretty excited about it.
It’s good that it’s happened, because it took a little longer than expected. We’re all glad.
Looking forward – what is your vision for FootyTips and how it fits into the ESPN network?
We’ve got a pretty strong and clear focus for what our brand is, and one of the objectives we have is to make FootyTips one of the most respected brands in Australia. That’s a huge task, but that’s our vision.
As for how that fits into the ESPN network, we’re going to be promoted across that whole network. The network is extremely good at branding, They know how to work all of that.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
